The History of Franchise

When people think about the subject of a franchise, they often assume that it is a modern invention. However, this is not the case, and this article will discuss the basic history of the franchise in general and in the United States.

The notion of franchising arose during the Middle Ages, where lords started selling rights to others for them to collect taxes and run markets on their behalf. However, this paints the picture of political activity instead of business activity. Business activity franchising surfaced in the mid-19th Century in Germany, where brewers drew up a contract with the owners of taverns for them to exclusively sell their beer in these taverns.

Franchising officially made its way to the United States in 1851 when Isaac Singer started selling rights to the sale of his sewing machines to an independent traveling salesman. At the turn of the 20th Century, the American automobile industry started in the franchise business. Ford and General Motors started franchise dealerships to independent businessmen to sell vehicles using their brand names. This was because the companies did not have enough funds to build necessary retail outlets at the start of the operations. The first franchise sold by General Motors was in 1898 to Detroit’s William Metzger. Henry Ford, on the other hand, franchised pharmacies to sell his vehicles.

With the introduction of vehicles being readily available across the United States, a new problem arose of the need to provide gasoline to fuel the vehicles locally. Due to the lack of capital needed to buy real estate and create distribution systems for gasoline, the oil industry entered the franchise business with dealerships to cover the gasoline need. However, the selling of rights required contracts, and thus the need for a franchise litigation lawyer arose.

Beverage companies like Coca-Cola had the same kind of problems with regards to the distribution of their beverages. Due to the high cost of transportation, they found a solution in franchising. Coca-Cola franchised the rights to bottle its beverage to several independent businessmen who got exclusive territories for them to distribute the products; in return, they would pay for and assumed the risk of distributing the product. The first franchise issued by Coca-Cola was in 1901 to Georgia Coca-Cola Bottling Company. Thus, the franchising wheel continued to turn unabated; from Louis Liggett’s Rexall drug store chain to the Western Auto franchise, Roy Allen and Frank Wright A&W Root Beer to Kentucky Fried Chicken, Dairy Queen, Dunkin Donuts, and the International House of Pancakes, McDonald’s; all these form the history of franchising in the United States. However, this was not limited to the automobile and food industry; franchising extended to other industries which saw franchising in the hotel industry, Kemmons Wilson’s Holiday Inn, convenience stores, 7-Eleven, the laundry, and dry-cleaning industry, Martinizing Dry Cleaning, etc.

Still, growth was not limited to within the United States and thus saw the founding of the International Franchise Association [About Us – Franchising Opportunities | International Franchise Association] in 1960.